- The Washington Times - Tuesday, April 28, 2009

President Obama’s plan to spare struggling homeowners from foreclosure by allowing bankruptcy judges to “cram down” their mortgages rates will face a daunting test in the Senate this week.

A handful of Senate Democrats have joined Republicans in opposition to the plan, virtually ensuring it will fail to clear the 60-vote procedural hurdle to end a filibuster.

Mortgage industry lobbyists, who say it would spur a wave of loan defaults by homeowners anticipating a mortgage bailout, are already celebrating the measure’s defeat.

“By granting judges this power, this bill would throw into question the value of the collateral that backs every mortgage made in this country - the home,” the Mortgage Bankers Association said.

Mr. Obama’s proposal would give bankruptcy judges power to modify both principle payments and interest rates for mortgage loans of certain distressed homeowners.

Senate Majority Leader Harry Reid, Nevada Democrat, said he will bring the housing bill to the floor. The bill’s proponents are holding out hope for passage.

Senate Majority Whip Richard J. Durbin, Illinois Democrat, led negotiations over the weekend to build support for the “cramdown” plan but the effort appeared to have fallen short as lawmakers returned to Washington on Monday.

Supporters say the measure is necessary to stem a rising tide of threatened foreclosures that could further destabilize the economy.

After about 2.3 million U.S. households last year received foreclosure notes, another 800,000 homes have already received notices this year, the Associated Press reported.

The housing bill also would extend a $500 billion credit line to the cash-strapped Federal Deposit Insurance Corp., which is reeling from having to bail out scores of banks.

In the House, lawmakers are taking up a separate measure to help consumers by adding restrictions on credit card companies.

The new rules, dubbed the Credit Cardholders’ Bill of Rights, would prohibit banks from raising rates on existing balances and require a 45-day notice of any rate increase.

It also would ban banks from issuing credit cards to customers under 18 years old unless they are financially independent.

“This landmark legislation helps level the playing field between cardholders and card companies,” said Rep. Carolyn B. Maloney, New York Democrat, the bill’s sponsor. “The Credit Cardholders’ Bill of Rights brings more transparency to the contractual relationship and give consumers the tools they need to responsibly manage their own credit.”

Mr. Obama has expressed support for the bill, though the administration is expected to suggest some minor changes before the debate begins this week.

The bill faces opposition from House Republicans, though it is expected to pass the chamber.

“This bill will do one of three things: raise interest rates for everyone, raise interest rates to those who pay their bills on time or deny credit to new borrowers, all in the midst of a recession,” said Rep. Jeb Hensarling of Texas, the ranking Republican on the Financial Services subcommittee on financial institutions and consumer credit.

“After a $700 billion bailout, a $1.138 trillion stimulus and $410 billion omnibus, the government has taken all of the money out of your wallet, now they want to take your credit cards too,” he said.

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